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(Bloomberg) — The US says it’s stepping up enforcement of the price cap on Russian oil in a new phase for the measure that was imposed by the Group of Seven Nations after the invasion of Ukraine.
The cap is intended to keep the oil market stable while limiting the revenue Russia earns for its chief commodity by restricting western services to crude oil sold at $60 per barrel. Over time, the cap has lost effectiveness as Russia built its own fleet, spending billions of dollars to acquire hundreds of vessels.
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The US Treasury Department sanctioned two companies and blocked two vessels accused of transporting Russian oil at prices above the cap. They are United Arab Emirates-based Lumber Marine SA, the registered owner of SCF Primorye, and Ice Pearl Navigation Corp, the registered owner of the Yasa Golden Bosphorus.
The Primorye is accused of carrying Novy Port crude priced above $75 per barrel from a port in the Russian Federation after the cap went into effect in December. The Golden Bosphorus carried ESPO crude priced above $80 per barrel after the cap took effect. Both vessels used US-based service providers while transporting the oil, Treasury said in a statement.
“We remain committed to implementing a price cap policy that has two goals: reducing the oil profits upon which Russia relies to wage its unjust war against Ukraine and keeping global energy markets stable and well-supplied despite turbulence caused by Russia’s unprovoked invasion of Ukraine,” Deputy Treasury Secretary Wally Adeyemo said in a statement.
Treasury released its new guidance and announced the sanctions just as G-7 finance minsters were meeting in Marrakech, Morocco, on the sidelines of the annual meetings of the International Monetary Fund and World Bank.
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A US official indicated there were currently no plans to lower the cap, as some European nations have suggested. The official also acknowledged that the size of the Russian fleet has grown, though the exact size could not be determined.
Treasury Secretary Janet Yellen last month said the effectiveness of the cap in reducing Russian revenue had waned over time as Moscow had found ways to evade its reach and break its rules.
A key metric of the cap’s impact is the discount of Russia’s Urals grade crude oil to Brent, a global benchmark. For many months that discount exceeded $30, but has recently fallen to about $10.
Yellen also said the coalition behind the cap needed to explore ways to restore its effectiveness.
Similarly, French Finance Minister Bruno Le Maire told reporters on Thursday that “loopholes” had emerged in the cap that the Group of Seven nations needed to address.
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